Option trades, week of Aug. 1, 2016

Last week

Week endingOpenHighLowClose
July 22, 20162154.502170.252151.252167.50
July 29, 20162167.752172.502152.002171.00

Commentary for last week

SP500 index made new highs on Monday and stayed under it for closing. It had held gains for 13 of 17 trading days since the break out of the previous year’s high.

This week:

The breakout above all-time highs and the market’s ability to hold price there is bullish. For the long-term the SP500 index remains on an uptrend. But for the short-term, price could have a bump first before it goes for new highs.

Calls:

Above the 2165 strike price, there are large call contracts bought at 2200 level and above. Index price could be pushed up there if there is a strong buy momentum triggered before Wednesday. Our system shows that index and ES shouldn’t close above 2215 level, therefore we look for short the calls when price goes above 2185.

Puts:

Under 2165 strike price, the 2150 and 2140 strike price puts have some heavy volume, but still lower than the calls. It indicates that as long as price stays above 2125 level, it should not trigger short-term correction. Only if the index goes under 2135 and closes under it, will it trigger heavy selling and push price down near 2100 level. Our system shows that index and ES shouldn’t close below 2095 level, therefore we look for short the puts when price goes under 2140.

Put/call volume ratio on SPX and ES Aug. 5 option is 1:1 from 2220 to 2135 level, and 1:1 from 2135 to 2075 level.

Nat’s trades for this week

ExpirationStrike price Sell options when ES price is
Aug. 5, 20162210, 2220 callsabove 2185
2200calls
Meanline 2165
Aug. 5, 20162110 putsbelow 2140
2100 , 2095 puts